Discovery Limited, a prominent player in the South African financial landscape, has announced robust financial results for the fiscal year ending on June 30, 2023. The company’s performance is underscored by its resilience in the face of macroeconomic uncertainty and its commitment to delivering quality earnings and cash flow.
The year 2023 posed several economic challenges, including prolonged inflationary pressures, rising interest rates, a remarkably strong US dollar, and increasing consumer pressure. These factors combined to create a cost-of-living crisis in many regions and constrained economic growth, following short-lived rebounds after the COVID-19 pandemic. In South Africa, the situation was further complicated by severe energy shortages.
Despite these challenges, Discovery Limited achieved significant milestones in its financial performance:
| Metric | June 30, 2023 | June 30, 2022 | Change |
|---|---|---|---|
| Normalized Profit from Operations (R million) | R11,661 | R9,384 | +24% |
| Profit from Operations (R million) | R8,662 | R7,858 | +10% |
| Normalized Headline Earnings (R million) | R7,678 | R5,816 | +32% |
| Earnings per Share (basic) – (cents) | 785.4 | 825.5 | -5% |
| Headline Earnings per Share (basic) – (cents) | 834.3 | 792.4 | +5% |
| Normalized Headline Earnings per Share (basic) – (cents) | 1,166.7 | 885.5 | +32% |
| Net Asset Value (R million) | 63,974 | 53,555 | +19% |
| Embedded Value (R million) | 98,176 | 86,258 | +14% |
| Embedded Value per Share (R) | 149.11 | 131.29 | +14% |
Note: All figures are unaudited and presented in South African Rand (R).
These impressive results can be attributed to the company’s strong premium and revenue growth, with core new business annualized premium income (API) increasing by 12%. Additionally, positive customer retention and indexation contributed to this growth, while total non-insurance income increased by a substantial 44%.
Discovery Limited operates across three business composites: South Africa (SA), United Kingdom (UK), and Vitality Global (VG). Each composite delivered strong financial results:
The company noted that economic assumption changes, particularly related to interest rates, had an impact on headline earnings growth. While these changes did affect headline earnings, they had no significant impact on the group’s liquidity, cash flows, or solvency.
The sharp rise in nominal and real interest rates in South Africa and the UK negatively affected headline earnings growth. In the UK, a hedging strategy proved effective, resulting in some gains and increased discretionary margins. However, in South Africa, economic assumption adjustments for Discovery Life amounted to R2,811 million, gross of tax.
Despite economic challenges, Discovery Limited demonstrated financial resilience throughout the year. Central liquidity remained strong, even after a R600 million reduction in debt. The financial leverage ratio (FLR) improved to 20%. Organic cash generation was robust, driven by growth in quality earnings, a significant recovery in Discovery Life’s cash generation following elevated COVID-19-related claims in the prior period, and cost reduction in new initiatives.
These financial strengths have supported the company’s decision to recommence dividend payments to shareholders.
The board of directors of Discovery Limited declared a final gross cash dividend of 110.00000 cents per ordinary share for the fiscal year ending on June 30, 2023. This dividend, sourced from income reserves, represents a significant milestone for the company. However, it is important to note that a dividend withholding tax of 20% will be applicable to all shareholders who are not exempt.
The salient dates for the dividend are as follows:
During the period from October 11 to October 13, 2023, share certificates may not be dematerialized or rematerialized.
Discovery Limited’s strong financial performance and resiliency in the face of economic challenges highlight its commitment to delivering quality earnings and shareholder value. As the company recommences dividend payments, it further strengthens its position as a key player in the South African financial sector. Investors and stakeholders are encouraged to review the complete audited financial statements for a comprehensive understanding of the company’s performance and outlook.
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